Suit accuses Redfin of systematic racial discrimination in Chicago, elsewhere

Fair housing groups say the online real estate broker offers fewer services to homebuyers and sellers in minority communities through its minimum-pricing policies.

Fair housing organizations have accused Redfin of systematic racial discrimination in Chicago and other cities, saying the online real estate broker offers fewer services to homebuyers and sellers in minority communities.

They say in a federal lawsuit filed in Seattle that that’s a type of digital redlining that has depressed home values and worsened the historic injustice in the housing market.

The organizations said in the lawsuit that, during a two-year investigation, they documented the effect of Redfin’s “minimum price policy,” which requires homes to be listed for certain prices to reap the benefits of Redfin’s services. The company was vastly less likely to offer realtor services, professional photos, virtual tours, online promotion or commission rebates for homes listed in overwhelmingly minority neighborhoods than it was in overwhelmingly white ones, they said their investigation found.

That meant homes in minority neighborhoods were likely to stay on the market longer and sell for lower prices than they otherwise might have, the lawsuit said.

“Redfin’s policies and practices operate as a discriminatory stranglehold on communities of color, often the very communities that have been battered by a century of residential segregation, systemic racism, and disinvestment,” the lawsuit said.

Mortgage lenders and brokers long discriminated by drawing lines on maps — known as redlining — and refusing to provide services for homes outside of white areas. Though outlawed decades ago, the practice has had lasting consequences, perpetuating poverty and restricting access to good schools, health care and other amenities.

Redfin, based in Seattle, was launched in 2006 and has grown to offer residential real estate brokering, mortgage, title and other services in more than 90 markets in the United States and Canada.

Glenn Kelman, the company’s chief executive officer, responded to the suit by saying the company has not violated the federal Fair Housing Act, “which clearly supports a business’s decisions to set the customers and areas it serves based on legitimate business reasons such as price.”

He also said: “Our long-term commitment is to serve every person seeking a home, in every community, profitably. The challenge is that we don’t know how to sell the lowest-priced homes while paying our agents and other staff a living wage, with health insurance and other benefits. This is why Redfin agents aren’t always in low-priced neighborhoods.”

Redfin previously has said it is devoted to eradicating systematic discrimination in the industry and that enabling people of color to find listings online — rather than relying on an agent to show them what homes are available — could help end segregation. Two years ago, Kelman hosted a symposium on racial prejudice in real estate.

The company once experimented with awarding realtors’ commissions based on customer satisfaction, rather than sale price, to promote the sale of less expensive homes but said it found it difficult to recruit agents.

But Redfin’s minimum-price and other policies have had the opposite effect, according to the National Fair Housing Alliance, a Washington, D.C.-based not-for-profit dedicated to eliminating housing discrimination, and nine of its member organizations. With financial support from U.S. Housing and Urban Development, they studied the policy’s effect in Chicago, Milwaukee, Detroit, Kansas City, Memphis, Baltimore, Philadelphia, Long Island, New York, Louisville, Kentucky and Newark, New Jersey.

Under the minimum-price policy, Redfin doesn’t offer its full services unless homes are listed for certain prices, which vary by market. When potential buyers click on homes that fall below those minimums, they receive a message saying, “Redfin is currently unable to show this property.”

For instance, in Chicago last June, the company didn’t offer services unless homes were listed for at least $400,000, the lawsuit said. In adjacent, predominantly white DuPage County, though, the minimum price was $275,000.

Because Redfin charges a minimum commission regardless of sale price, the practice can’t be justified by business motives, the lawsuit said.

It also said Redfin sometimes failed to provide services even when a home’s price topped the minimum. That was much more common in predominantly minority neighborhoods, including Chicago’s South Side, the organizations said.

Using Census Bureau data to compare ZIP codes that are at least 70% white with those that are at least 70% minority, the organizations compared listings for which Redfin offered its “best available service” with those for which it offered no service on multiple dates over two years.

On June 12, 218 homes were posted on Redfin in non-white neighborhoods in the Kansas City area. Sixteen had Redfin’s best service, and 127 were offered no service.

There were 4,550 homes in predominantly white Kansas City neighborhoods. More than half received the best available service, and only 14% had no service, the lawsuit said.

Similar disparities were found in other cities, it said.